Muscat – Fitch Ratings has affirmed Energy Development Oman’s (EDO) long-term Issuer Default Rating (IDR) at BBB- with a stable outlook, reflecting the company’s strong operational and financial profile.

The rating agency noted that EDO’s rating remains constrained by the sultanate’s sovereign rating due to its close ties with the Omani government.

‘EDO’s rating is constrained by that of Oman due to strong linkages between the company and the state. Under our Government-Related Entities (GRE) Rating Criteria, we assess the precedents of support as Strong, while we assess decision-making and oversight, preservation of government policy role, and contagion risk as Very Strong,’ the agency said.

Fitch said EDO’s ‘bbb+’ Standalone Credit Profile (SCP) is underpinned by its large-scale oil and gas operations, strong and resilient cash flow generation, contracted gas sale prices, a flexible royalty framework, a flexible dividend policy and low leverage.

EDO is Oman’s national energy company and holds participating interests in two large concessions that account for around 60% of the sultanate’s oil and gas production.

Fitch also noted that EDO’s operations have not been materially affected by the ongoing conflict in the Middle East. ‘To date, EDO’s operations have not been materially affected by the Iran war as the company is not reliant on the Strait of Hormuz for exports,’ it said.

The rating agency expects EDO to maintain a strong financial profile through 2029 under its rating case, despite increasing capital expenditure, as well as high royalty and tax payments to the government.

Fitch added that EDO is evaluating new gas projects that would be integrated with Oman’s LNG export infrastructure, enabling the company to export gas volumes directly.

‘We currently do not incorporate any impact from these projects into our rating case. We will assess their impact on the company’s SCP if and when they are sanctioned,’ the rating agency said.

Fitch also expects EDO to maintain a robust liquidity profile, supported by strong pre-dividend free cash flow, proven access to international debt markets and its strong links with the sovereign.

‘We expect EDO’s flexible dividend policy will allow for liquidity preservation during periods of restricted capital-market access or lower oil prices,’ it added.